Filed under: Health Reform, Ted Kirchharr, The Busy Business Owner's Guide to Health Care Reform: What You Need To Know | Tags: ACA, employer, Health Care Reform, Health Reform, Human Resources, Insurance Reform, Landrum Human Resources, Landrum Staffing, PEO, PPACA
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“The Busy Business Owner’s Guide to Health Care Reform: What You Need to Know”
written by Ted A. Kirchharr
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To read about the latest updates to the Health Care Reform Law go to: http://landrumhrblog.com/about/health-care-reform-law-updates/
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Filed under: Human Resources, Jim Guttmann, SPHR | Tags: Human Resources, Landrum Human Resources, National Labor Relations Act, National Labor Relations Board, NLRB, PEO
Appeals Court Strikes Down NLRB Posting Requirement
by Jim Guttmann, SPHR on Monday, May 13, 2013
In November, 2011, we informed you that the National Labor Relations Board (NLRB) issued a rule requiring most private-sector employers to post a special notice to employees of their rights under the National Labor Relations Act (NLRA). We updated you in April, 2012, that implementation of this posting requirement had been blocked in Federal Court. Click here and here for our previous blogs on this subject.
Now, it has been announced that the D.C. Circuit Court of Appeals has struck down the National Labor Relations Board’s posting rule because it violates employers’ free speech rights. The poster would have explained the rights of workers to join a union and bargain collectively to improve wages and working conditions. It also would have made it clear that workers have the right not to join a union or be coerced by union officials.
In the ruling, A. Raymond Randolph, senior circuit judge for the U.S. Court of Appeals, District of Columbia Circuit, wrote, “The right to disseminate another’s speech necessarily includes the right to decide not to disseminate it.” He said, “First Amendment law acknowledges this apparent truth; all speech inherently involves choices of what to say and what to leave unsaid.”
The NLRB poster rule is also under review by the U.S. Court of Appeals for the Fourth Circuit.
The NLRB has not indicated whether it will seek Supreme Court review of the court’s decision. Karen Harned, executive director of the National Federation of Independent Business Small Business Legal Center, expressed that the ruling is a “monumental victory for small business owners across the country.”
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As a Landrum Professional Human Resources Manager, Jim is certified as a Senior Professional in Human Resources (SPHR) and has over 20 years of HR generalist experience for a large government contractor and Fortune 500 Company. He holds a Masters in Business Administration from Florida State University and is an active member of the Greater Pensacola Chapter of the Society for Human Resources Management (GPCSHRM), previously serving as their Vice President of Information Services and Chairman of the Workplace Diversity Committee. Jim is also certified as a County Mediator and in the administration of the Myers Briggs Type Indicator(MBTI).
Filed under: Jim Guttmann, SPHR, Life | Tags: educator, Life, Mother's Day, motherhood, women's movement
Dream Big Thoughts
(True Story) by Jim Guttmann, SPHR on May 8, 2013
It’s the mid 1970’s and the women’s movement is gaining significant traction across the country. Ms. Randall teaches the kindergarten class at Oxhead Road Elementary School in Centereach, New York (part of Suffolk County in Long Island). Theresa Perez is a student in the class. During the week, Ms. Randall has impressed upon her students that they can accomplish anything they want in life and that no one should tell them that they can’t do anything if they set their minds to it. Although her message was for everyone in her class, she especially wanted to bring this message to the little girls. You see, some folks might describe Ms. Randall as a women’s libber.
At one point after much discussion about career opportunities, the children were asked to draw a picture of what they would want to become when they grew up. Students got busy drawing pictures of an astronaut, fire fighter, police officer, doctor, judge, etc. It was a fun day and the kids rightfully felt good about what they had drawn.
That night, Theresa’s mom, Mrs. Perez, went to work in her nursing job covering the 11pm – 7am night shift. Arriving home the following day after her shift, she soon received a call from Ms. Randall. “Mrs. Perez, I need you to come in for a conference. It’s about Theresa.” This didn’t seem to be very good news so Mrs. Perez quickly went over for this meeting. She wondered what kind of problems that Theresa could be having in school.
When she arrived, Ms. Randall explained to Mrs. Perez about the message she had conveyed to each student throughout the week, particularly the girls. And she told her of the assignment to dream big and draw a picture of what they wanted to become in life. It was then that Mrs. Randall said, “Mrs. Perez, I need you to see the picture that Theresa drew. She turned in this!” Mrs. Perez looked down and saw a picture of a young woman with a protruding stomach. Mrs. Randall then said, “Mrs. Perez, I have no plans to ever have children… but if I did, I would want YOU to take care of them.”
Ms. Randall went on to explain that she had questioned Theresa about what she had drawn. Did Theresa mean that a woman couldn’t become a judge, police officer, doctor, etc.? Theresa said, “No, I know we can do these things. It’s just that I want to be just like my mom. She has always taken care of me and is my very best friend.”
Now almost 40 years later, Theresa is mom to two beautiful little girls of her own. With her husband Aaron, she lives in Raleigh, North Carolina and is employed there as a Senior Financial Analyst. Theresa’s mom is a volunteer in the Pensacola community. Among her volunteer hours, she assists at the Alpha Center which provides free services to anyone with a problem stemming from pregnancy.
To all mothers and grandmothers who inspire us to dream big thoughts,
Best Wishes for a Very Happy Mother’s Day!

As a Landrum Professional Human Resources Manager, Jim is certified as a Senior Professional in Human Resources (SPHR) and has over 20 years of HR generalist experience for a large government contractor and Fortune 500 Company. He holds a Masters in Business Administration from Florida State University and is an active member of the Greater Pensacola Chapter of the Society for Human Resources Management (GPCSHRM), previously serving as their Vice President of Information Services and Chairman of the Workplace Diversity Committee. Jim is also certified as a County Mediator and in the administration of the Myers Briggs Type Indicator(MBTI).
Filed under: Human Resources, Jim Guttmann, SPHR | Tags: ADA, Americans with Disabilities Act, EEOC, Health Insurance Portability and Accountability Act, HIPAA, Human Resources, Landrum Human Resources, PEO
Can I Tell Staff about an Employee’s Health Condition?
by Jim Guttmann, SPHR on Monday, April 22, 2013
An employee approaches the owner of a large retail store to inform her that he has Post Traumatic Stress Disorder (PTSD) which will require time away from work for counseling. During the meeting, the owner doesn’t ask the employee if she can tell other staff members about this health condition nor does the employee specifically grant permission. Under these circumstances, can the owner share this information with others at work?
First of all, would disclosure of this information to staff violate the employee’s privacy rights under the Health Insurance Portability and Accountability Act (HIPAA) regulations? The answer in this instance is actually “No.” HIPAA does not cover employers, per se. HIPAA only applies to the covered entities of health care providers, health plans and health clearing houses. The only way HIPAA would apply is if an employer is one of these three covered entities.
Does this mean that the information can be freely shared? Well, it depends on what information is being shared and to whom. According to the Equal Employment Opportunity Commission (EEOC), the individualized assessment of virtually all people with PTSD will result in a determination of disability under the Americans with Disabilities Act ( ADA). The ADA requires employers to keep medical information confidential, subject to certain narrow exceptions. Under the ADA the owner may disclose such information only to:
- Supervisors and Managers if it relates to “necessary restrictions on the work or duties of the employee and necessary accommodation;”
- First Aid and Safety Personnel “when appropriate, if the disability might require emergency treatment;”
- Government Officials investigating compliance with the ADA, upon request;
- State workers’ compensation offices, state second injury funds or workers’ compensation insurance carriers in accordance with state workers’ compensation laws, if there is an injury on the job; and
- Agents for insurance purposes.
Considerable guidance on this subject from EEOC (who enforces the ADA) can be found here, including what information may be shared. For instance, the guidance differentiates between a mere notice that an employee has taken sick leave or had a doctor’s appointment, which is not considered to be covered medical information, and documentation which contains information regarding the employee’s diagnosis or symptoms.
The overall theme of EEOC’s guidance is that medical information should be shared with others only on a “need to know basis” and only to the extent that the information shared is vital to them. Of course, the employee with the medical condition may choose to share his/her own personal health information at any time. Once disclosed openly, it’s no longer protected information.
Now let’s go back to the example where the employee confided with the retail store owner. What about the employee’s co-workers? Wouldn’t they have a legitimate need to know? Would it not be okay for the supervisor to share information with co-workers who may have to pick up the slack in the employee’s absence? In this instance, we would strongly recommend getting the employee’s written permission as to what can be shared, if anything. If the employee does not want the medical condition shared with others, the supervisor should honor that request.
So, let’s say that the employee does not want anything shared. What could the supervisor say to the co-workers who feel that the employee is receiving different or special treatment? In response, the supervisor could emphasize that she tries to assist any employee who experiences difficulties in the workplace. She may add that many of the workplace issues encountered by employees are personal and, that in these circumstances; it is the company’s policy to respect employee privacy. Finally, she could reassure a co-worker that his privacy would be similarly respected if he ever had to ask the company for some kind of workplace change for personal reasons.
If the co-worker persists with questions about the employee’s disability or accommodations, it is recommended that the supervisor avoid discussion of that subject. Instead, the supervisor could say that the company is acting in compliance with federal law or for a legitimate business reason. Or, the supervisor can simply say that she is not at liberty to discuss any information about the other employee.
The bottom line is that employers who obtain medical information should first “pause” before necessarily sharing information with others. Based on the circumstances, improper sharing of information could violate the ADA, The Family and Medical Leave Act (FMLA), Fair Credit Reporting Act (FCRA), HIPAA or state law. For that reason, we highly encourage you to work closely with a Human Resources Professional or Employment Law Attorney if you are concerned about how medical information is being shared in your organization.

As a Landrum Professional Human Resources Manager, Jim is certified as a Senior Professional in Human Resources (SPHR) and has over 20 years of HR generalist experience for a large government contractor and Fortune 500 Company. He holds a Masters in Business Administration from Florida State University and is an active member of the Greater Pensacola Chapter of the Society for Human Resources Management (GPCSHRM), previously serving as their Vice President of Information Services and Chairman of the Workplace Diversity Committee. Jim is also certified as a County Mediator and in the administration of the Myers Briggs Type Indicator(MBTI).
Filed under: Human Resources, Matilda Keith | Tags: EEOC, employees, employer, Flight Attendant, Human Resources, Mad Men, PEO
Come Fly With Me
written by Matilde Keith, PHR on April 5, 2013
It’s almost time for the season 6 premiere of my all-time favorite show, Mad Men! Season 6 airs on AMC on April 7th at 9/8c. I’m anxiously anticipating what scandalous and wildly inappropriate things these people will do next at their place of employment! Gasp! As an HR Manager, I cringe when I see Don Draper grab the decanter of whiskey from his office mini bar and pour himself a drink. Meanwhile his underlings are making sexual advances at his latest secretary. I think to myself, “They really are mad, those men!”
Was that really what things were like back then? (And I hope none of you are saying, “What’s she talking about, ‘back then?’ We do that at my job all the time!”). I’m sure you know, that kind of behavior is no longer legally or socially acceptable, but in the 1960s workplace? Sure, why not?
I often take for granted the rights we enjoy in today’s workplace. I wonder, though, how did we get here? Who were the real people in the Mad Men office who said, “Enough?” There are many examples, but one industry that particularly intrigues me is the airlines.
Queue music: Frank Sinatra sings, Come fly with me, let’s fly, let’s fly aw-ayyy. Ah, stewardesses. Either you’ve never heard that term, haven’t heard it in a while, or it makes you feel like I just said a dirty word. The world’s first flight attendants were introduced by United Airlines in the mid-1930s. Back then the airline had a formal policy that refused to hire married women for their cabin service. Married women need not apply. Single women that were hired and later became married would be promptly dismissed; this became an industry-wide standard. The majority of cabin service was provided by women attendants. Although some airlines did employ a few male attendants, the stewards were not held to the same marriage bans.
In the 1950s, American Airlines were the first to issue an age restriction on their flight attendants, in addition to their marriage ban. Once you reached the age of 32 you were automatically asked to retire from passenger service. The Air Line Stewards and Stewardesses Association (ALSSA), the national flight attendant union, protested this policy. The union was able to convince the airlines to allow flight attendants hired before the age ceiling was introduced to remain employed under “grandmother rights”. The union protested the marriage bans and age ceilings from time to time thereafter, but they gained little or no resolutions.
But then came the Civil Rights Act of 1964. Title VII of the Act makes it unlawful for an employer to disc
riminate against any individual because of their race, color, religion, sex, or national origin. In a documentary by PBS called Makers: Women Who Make America, it is said that the decision to add gender to Title VII was “a surprise, last minute move.” The Director of the newly-developed Equal Employment Opportunity Commission (EEOC) called it “a fluke.” Nonetheless, flight attendants and their unions believed its existence would give them some leverage in collective bargaining. In some ways it did; certain airlines raised their age ceilings to 35 (up from 32) and others gave stewardesses a 6-month grace period after marriage before they were fired.
In 1965, stewardesses would be the very first women to file a charge of sex discrimination with the EEOC. The EEOC later issued general guidelines that made the act of firing married female employees a form of sex discrimination if the policy was not also applied to male employees. Later, they would issue their first ruling on a sexual discrimination complaint brought by Judith Evenson against Northwest Airlines. EEOC Commissioner Aileen Hernandez found there was “reasonable cause” to believe Northwest illegally discriminated against Evenson because their “no-marriage” policy was not applied to Northwest’s male flight attendants.
When asked by the Air Transportation Association (ATA) to issue a categorical general finding on age and marriage violations of Title VII, the EEOC began a comprehensive study of airline policies. They issued their general ruling in 1966, making a range of airline employment practices illegal. Within days, the airlines secured an injunction charging there was a conflict of interest in the ruling. Commissioner Aileen Hernandez who had voted in the case was allegedly involved with the newly-formed group, National Organization for Women (NOW). The airlines were able to persuade a federal judge to enjoin the EEOC from releasing the ruling on the airline policies based on Hernandez’s perceived feminist bias.
The EEOC began another study in 1967. That same year, Congress passed the Age Discrimination in Employment Act of 1967. Unfortunately for flight attendants, the act only protected workers between the ages of 40 to 65 from age discrimination. The flight attendants would have to keep fighting on their own.
Even though in 1968 the EEOC issued individual rulings as well as a general ruling declaring age and marital restrictions on stewardesses’ employment to be illegal sex discrimination under Title VII, most flight attendants were still being defeated in federal courts. Progress, however, was being made through their labor union contract negotiations. Just before their all-female flight attendant crew went on strike, American Airlines granted them the right to marry without forfeiting their jobs. United would follow suit later that year. This effectively brought an end to the airlines’ “single-women-only” policies.
Perhaps the most historically important case concerning flight attendant employment and sex discrimination was Diaz v. Pan American in 1971. What made this case different is that it was initiated by a male applicant denied employment by Pan Am. During trial Pan Am offered several justifications for its policy of hiring only females for passenger service. The trial judge in Florida ruled in favor of the airline stating the policy met the “BFOQ” standard defined in Title VII. This clause in the Act allows employers to discriminate as long as sex is “a bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise.”
In 1972 the appellate court reversed the ruling. The Fifth Circuit appellate court said, to be legal sex discrimination, it has to be necessary to the essential business of an employer. In Pan Am’s case, they found it was not necessary to the carrier’s basic business of transporting passengers safely, but merely convenient. Pan Am requested a higher appeal but the U.S. Supreme Court turned it down.
This case set an important precedent and allowed men to enter the flight attendant occupation in greater numbers. Now the terms “stewardess” and “steward” are widely considered ancient and sometimes derogatory. What was once a company standard is now considered illegal. It makes me wonder, what are we doing in today’s workplace that 50 years from now will be considered socially unacceptable and possibly illegal?
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As a Human Resources Manager for Landrum Professional Employer Services, Matilde Keith, has over five years of human resources experience in the Pensacola, FL area. Keith specializes in salary surveys, compensation and job classification reviews, among other human resources generalist duties. Prior to her current position, Keith worked as an HR Specialist for Landrum Staffing, managing the staffing needs of one of Landrum Staffing’s largest accounts. Keith is a 1st generation Cuban-American, fluent in both English and Spanish. Born and raised in Key West, FL, Keith calls herself “an original Key West Conch”.
Filed under: Human Resources, Jim Guttmann, SPHR | Tags: DOL, employees, employer, Form 1099, Human Resources, Internal Revenue Service, IRS, Landrum Human Resources, PEO, taxpayer, US Department of Labor, VCSP, Voluntary Worker Classification Settlement Program
IRS Expands Settlement Program
by Jim Guttmann, SPHR on March 28, 2013
In our February 28th blog, we pointed out that the Internal Revenue Service (IRS) is intensely scrutinizing situations in which workers may be improperly classified as “independent contractors”.
To encourage employers to consider reclassifying their workers as “employees” (i.e. when past practice has been questionable or unclear), the IRS established a Voluntary Worker Classification Settlement Program (VCSP) in September 2011. It’s an opportunity for employers to properly classify their workers as employees without incurring severe penalties. When the program was put in place, the initial eligibility requirements for the VCSP were as follows:
- The taxpayer must have consistently treated the workers as nonemployees, and must have issued all required Forms 1099 to the workers for the previous three years.
- Neither the taxpayer nor certain affiliates can currently be under an employment tax audit by the IRS.
- The taxpayer cannot be currently under audit concerning the classification of the workers by the Department of Labor or by a state government agency.
- A taxpayer who was previously audited by the IRS or the Department of Labor concerning the classification of the workers will only be eligible if the taxpayer has complied with the results of that audit.
Since putting the program in place, nearly 1,000 eligible employers have taken advantage by applying for the VCSP. As a result of their decision to now treat their workers as employees (rather than independent contractors); they obtained partial relief from federal payroll taxes.
At the end of last year, the IRS modified several eligibility requirements thus making it possible for many more interested employers to apply for this program. Under the revamped program, employers under IRS audit, other than an employment tax audit, can qualify for the VCSP. These and other permanent modifications to the program are described in Announcement 2012-45 and in questions and answers, posted on IRS.gov.
Further, until June 30, 2013, the IRS is temporarily waiving the eligibility requirement that workers had to have filed Forms 1099 in the previous three years. Details of this special IRS offering can be found here.

As a Landrum Professional Human Resources Manager, Jim is certified as a Senior Professional in Human Resources (SPHR) and has over 20 years of HR generalist experience for a large government contractor and Fortune 500 Company. He holds a Masters in Business Administration from Florida State University and is an active member of the Greater Pensacola Chapter of the Society for Human Resources Management (GPCSHRM), previously serving as their Vice President of Information Services and Chairman of the Workplace Diversity Committee. Jim is also certified as a County Mediator and in the administration of the Myers Briggs Type Indicator(MBTI).
Filed under: Elizabeth Oakes, SPHR, Human Resources | Tags: "Bracket Day", basketball, employees, employer, final four, Gambling in the workplace, HRCI, Human Resources, Landrum Human Resources, lottery pool, March Madness, PEO, SHRM, SPHR
It’s Bracket Day!
by Elizabeth Oakes, SPHR on Monday, March 18, 2013
For those of you unaware what bracket day is, it is a celebration of the upcoming NCAA Division I Men’s Championship (aka March Madness). And how do we celebrate? By filling out our brackets … at the office?
Personally, I don’t really follow basketball. It’s one of those sports that I’d prefer to watch live rather than televised, so I didn’t really know today was Bracket Day until I heard it on the news this morning. What I found interesting in the newscast was when they said “It’s Bracket Day, here’s (insert sportscaster’s name) with all the information you’ll need to fill out your bracket at the office today.”
WHAT? We do this at work?
Don’t get me wrong, I’m not delusional. I recognize that gambling happens at work. There’s the office pool for when Suzy will have her baby, or the occasion when multiple staff members pitch in for lottery tickets. What surprised me is that this particular gambling is mostly focused in the workplace. Fantasy football is usually experienced online or with a group of friends, and is sometimes done in the office. Basketball gambling, though, is mostly observed in the workplace.
Interesting.
So where does that leave employers? Is it okay for this to happen in our workplace? Are we liable for anything that goes wrong? Do I need a policy? Are you going to tell us to knock it off and be a complete killjoy?
Easy, tiger. No, sports fans, I’m not going to take all the joy out of this day. There is absolutely nothing wrong with having a little fun at work (see past blog post), just as long as it doesn’t get out of hand and we still accomplish what is needed for the day. I propose the following reminders:
- You don’t have to participate, but you can’t ignore it either. What I mean by that is that you don’t have to participate, as a supervisor, if you are disinterested – but also cannot pretend that it doesn’t exist. I suggest that you oversee what’s going on from a distance. If you aren’t gambling yourself, it’s still a good idea to be “present” for discussions or to be mindful of how things are going. The last things you need are tempers rising, or good natured ribbing that goes beyond fun. It’s important that you keep tabs on the temperature of the competition and step in where it’s necessary to diffuse inappropriate behavior before it goes too far. Also, make sure that those who do not want to participate are not feeling pressured into joining the event.
- Make sure the rules are clear to all participants. Again, you might not be orchestrating this pool, but you’ll need to follow up with the person in charge of the competition to make sure the rules are clearly explained and followed, as well as ensuring that this person is well aware of your expectations in the workplace. Make sure they understand that they are the responsible party to ensure the pool is handled smoothly, professionally, and legally.
- Make sure it’s legal in your area. Not every city and state allow for all, or any, types of gambling in the workplace. Check your state laws and city ordinances to make sure you aren’t doing anything illegal.
- Is work getting accomplished? It doesn’t matter if it’s perfectly legal in your state, everyone is getting along, and the pool runs smoothly – if the work isn’t getting done, it’s a problem. In line with the first bullet point, make sure that you express your expectations of your staff clearly and up front that everyone’s main objective is, as always, to accomplish their work for the day. Participation in the pool or event is voluntary but each individual is responsible for managing his or her own time to ensure the work flow process is not slowed down. Then, hold everyone accountable on your end.
- Require that it’s done in non-working areas and during non-working times. If you have a No Solicitation policy, allowing the advertising/promotion of brackets and other events could negate or lessen your argument against unions. It’s smarter to restrict the fun to non-working breaks, in non-work areas, and to keep it off of the company email. For a little more information on how this can affect your no solicitation policy and unions: http://www.shrm.org/Publications/HRNews/Pages/March-Madness-2013.aspx
…And if I can offer you one more tidbit of advice:Please beware of the group buy-in for lottery tickets. Many of these groups end up in court fighting with each other over the percentage split between the members of the group. Even those who clearly define the rules of the lottery buy-in still end up in court. Still not convinced? Check out this article before you decide to join the next lottery pool in your office, and don’t say I didn’t warn you!
http://news.yahoo.com/group-lottery-wins-splitting-spoils-tough-083307501.html
Elizabeth currently practices as a Human Resource Manager for Landrum Professional Employer Services in Pensacola, Florida. In this role she ensures that Landrum’s clients are in compliance with all local, state and federal laws that impact on human resources. She assists, as needed, with hiring, terminating, counseling, and training. Elizabeth also advise business owners and employees on the potential resolution of work related issues and consult with employers on the implementation of best human resources practices.
Elizabeth is certified as a Senior Professional in Human Resources (SPHR) through the Human Resource Certification Institute and the Society for Human Resource Management.
Filed under: Human Resources, Jim Guttmann, SPHR | Tags: "duck test", "misclassification of employee status", DOL, employees, employer, Hourly, Human Resources, Independent Contractor, Internal Revenue Service, IRS, Landrum Human Resources, PEO, Salaried Exempt. Richard Cunningham Patterson Jr., US Department of Labor, Working a Better Way
QUACK! CAN YOU PASS THE DUCK TEST?
by Jim Guttmann on February 28, 2013
“Suppose you see a bird walking around in a farm yard. This bird has no label that says ‘duck’. But the bird certainly looks like a duck. Also, he goes to the pond and you notice that he swims like a duck. Then he opens his beak and quacks like a duck. Well, by this time you have probably reached the conclusion that the bird is a duck, whether he’s wearing a label or not.”
This profound statement is a quote from Richard Cunningham Patterson Jr., United States
ambassador to Guatemala during the Cold War in 1950. It is interesting how this “duck test” is quite relevant for employers today. How so? Using the duck analogy, the Department of Labor (DOL) and Internal Revenue Service (IRS) maintain that some employers are knowingly or unknowingly misrepresenting the status of an employee on two important matters. Although it’s tough economic times, these agencies are not very forgiving when it comes to employee misclassification. Indeed, they just view these employers as “non-compliant with the law” (i.e. they have failed the duck test). So, what are those two areas of unlawful activity?
Misclassifying Employees as Independent Contractors:
Sometimes employers may improperly classify workers as “independent contractors” for various reasons such as administrative convenience; to avoid having to pay payroll taxes, overtime, etc.; to avoid having to cover the worker under workers’ compensation or unemployment compensation insurance; due to “industry standards” or even at a worker’s request. Before designating any worker as an independent contractor, please know that the fact that a worker has signed a document agreeing to be an independent contractor nor how long the contractual relationship has existed will be considered relevant by the IRS or DOL. If deemed unlawful by the agency, the worker’s consent will not make the arrangement valid. At all times, the facts characterizing the actual relationship will be what counts. That’s right, the Government says that you can’t call a duck a swan, goose etc., when it is actually a duck. Don’t be surprised if one day a government agency decides to conduct a “duck test” on your Independent Contractor.
Okay but aren’t some individuals truly independent contractors? Yes, provided that they meet the IRS standards by passing the “duck test.” In January, 2006, the IRS offered guidance on its “duck test” for independent contractor status by explaining that they focus on behavioral control, financial control, and the type of relationship between the worker and the company. The most common method used by employers for determining Independent Contractor vs. Employee status is through a review of the IRS 20 factor test. You can access that test here.
Misclassifying Employees as Salaried Exempt When They Should Be Hourly:
Sometimes, employers misclassify employees as “Salaried Exempt” and, by doing so; avoid paying overtime or minimum wage when those employees work more than 40 hours in the work week. This could have been done without knowledge of governing laws or because the employees requested to be paid on a salary basis. Although sometimes misunderstood, a salary by itself does not mean an employee is not entitled to overtime pay. If the DOL suspects that an employee has been misclassified as salaried exempt, it won’t matter that the employer and employee agreed to the misclassification. It also won’t matter what job title was given to the employee or that the job description is written in such a way that it embellishes the duties that the employee actually performs. What will matter is whether or not the classification of the employee can withstand an on-site desk audit by the DOL auditor. So, let’s just refer to this audit as the “duck test.”
Okay, but aren’t some employees truly salaried exempt? Yes, provided that their positions meet one of the Executive, Administrative, Professional, Computer, Outside Sales, or other industry-specific exemption standards. In other words, it has to pass that “duck test.” To do a proper assessment of whether an employee is salaried exempt or hourly, please click here for a link to the DOL’s Fair Labor Standards Act guidelines on this matter.
Risk to Employers:
Keep in mind that misclassifying workers can have tremendous financial consequences for companies. It may be far more serious than improperly calling a duck a swan or goose. If it is an independent contractor situation, employers may have to endure an audit from the IRS or a state department of taxation. If it is a wage and hour matter, employers may find themselves in a wage and hour audit, or a class action or individual lawsuit and be taken to court. The company will not only have to pay back wages and overtime owed, but a variety of penalties and in many cases, attorney fees. Non-complying employers may also be required to pay amounts that should have been withheld or paid on the employees’ behalf. For example, taxes, FICA, FUTA, benefit contributions or the value of lost benefits, plus penalties, interest, other damages, and/or attorney fees. Employees who are misclassified as independent contractors and who have work-related injuries and would normally rely solely on workers’ compensation benefits, may be able to file a negligence claim against the employer.
Misclassifying employees is a costly mistake that can happen to any company regardless of the company’s “good faith” intentions. So, make sure that you can pass the duck test. Simply stated, here is our advice to you. If you have doubts about whether a worker meets the independent contractor standard, it would certainly be safer to make him/her an employee. If you have doubts about whether an employee is salaried, it would be prudent to make him/her an hourly employee.
Being knowledgeable and compliant with the test standards can save yourself and your company a great deal of money and negative exposure in the long run. And that’s not just a bunch of quackery!

As a Landrum Professional Human Resources Manager, Jim is certified as a Senior Professional in Human Resources (SPHR) and has over 20 years of HR generalist experience for a large government contractor and Fortune 500 Company. He holds a Masters in Business Administration from Florida State University and is an active member of the Greater Pensacola Chapter of the Society for Human Resources Management (GPCSHRM), previously serving as their Vice President of Information Services and Chairman of the Workplace Diversity Committee. Jim is also certified as a County Mediator and in the administration of the Myers Briggs Type Indicator(MBTI).

